Pandora Earnings: What the Analysts are Saying

Pandora Media P reported its fourth quarter results. The company announced an EPS of $0.11, beating the consensus estimate $0.08. Revenue of $200.8 million was in-line with the consensus estimate.

Pandora issued first quarter guidance and sees its revenue to be $170 million to $176 million, within the $171.7 million consensus estimate. The company expects its EPS to be -$0.16 to -$0.14, worse than the consensus estimate of -$0.12

"2013 marked notable growth from user metrics to financial achievements," Pandora CEO, president and chairman Brian McAndrews said in a press statement.

"These have largely been driven by our position as a leader in mobile media," he added, "both in user engagement and monetization. We remain intensely focused on advancing Pandora's mission to reinvent radio. To fully capture the substantial market opportunity ahead of us, we will continue to aggressively invest in 2014 in sustained audience and engagement growth as well as activities that further accelerate monetization. As such, our bias will continue to be toward revenue growth and capturing additional market share."

Morgan Stanley: Safe and Sound

Scott Devitt, analyst at Morgan Stanley said Pandora's results were “safe and sound” and the company is on track to capitalize in the online ad market.

“Pandora's beat was driven by advertising revenue, rather than subscriptions, for the first time in several quarters and RPM (revenue per thousand) metrics all reached record highs for the first time in a single period,” said Devitt in a note to clients.

Devitt wrote that Pandora's hiring of more than 100 salespeople throughout 2013 will begin to show results over the next few quarters and that ad RPMs will rise throughout 2014.

Leading the company's charge for 2014, he said, is CEO Brian McAndrews -- who “appears to be pushing ad product innovation (programmatic buying and advanced geo-targeting were cited as potential endeavors) and may invest in marketing the service to new users now that Pandora has greater financial flexibility to do so.”

Shares are Buy rated with no assigned price target.

Raymond James: Strong upside, Valuation Concerns

Aaron Kessler, analyst at Raymond James. said Pandora offered several positives and negatives in its quarterly report but remain positive on the company's long term outlook.

According to Kessler, the positives include content acquisition costs which came in 250 bp below expectations, and EBITDA of $26.5 million was above the estimate of $17 million.

The negatives include listener/user metrics for January, which includes a 13 percent listener hour growth, which is below investor expectations. Additionally, mobile RPM showed 42 percent year over year growth but was relatively flat quarter over quarter in a seasonally strong advertising quarter.

“While we remain positive on the long-term fundamental outlook for Pandora, we believe shares are fairly valued at current levels and maintain our Market Perform rating,” said Kessler.

Shares are Market Perform rated with no assigned price target.

Albert Fried: Dead Money for Six Months

Rich Tullo, director of research at Albert Fried & Company said that Pandora shares “could be dead money.”

Tullo commented in a note to clients that local advertising may be weak -- and it's not clear if this weakness is weather related or a “pre-existing cyclical weakness or an anomaly.”

If the advertising market is indeed weak this would affect auto dealers, home related retailers, core local advertisers the most. Given this possibility, there is no guarantee that Pandora can increase its RPMs, which at current levels of $41, falls below Tullo's estimates of $45.

Accordingly, “Pandora longs should reweight the shares because under a best case scenario growth momentum is slowing," he said, "and we think there is a risk to the local ad market until April of 2014.”

Shares are Underweight rated with a price target of $23.

Barrington: Dip Presents Buying Opportunity

Jeff Houston, analyst at Barrington Research wrote Pandora is expected to begin taking market share in the online ad market, and a modestly lower guidance should be seen as a buying opportunity.

“We expect Pandora to begin taking share of the $16 billion U.S. broadcast radio market (74 percent is local), while maintaining share of the $3 billion mobile advertising (48 percent CAGR) and $14 billion online ad markets (13 percent CAGR),” Houston said in a note to clients. “The company has 270 salespeople, after adding 100 in 2013. It plans to ad 80-100 in 2014 and reach 500 in a few years.”

Houston is bullish on the company because of its better targeting abilities, scale and a superior user experience with personalized songs and fewer interruptions.

Shares are Outperform rated with a price target of $40.